To pay or not to pay, VAT is the question

Churches and Christian charities are not often able to recover VAT on purchases. Therefore, trustees should consider how to reduce or eliminate VAT costs on expenditure by:

· Using suppliers that are not VAT registered themselves (because, for example they are too small to need to).
· Making sure that all available reliefs are claimed.   Business suppliers may not always be aware of these, so be alert to opportunities.
· Taking advice on big projects (eg building work).   Sometimes significant savings can be made by designing things slightly differently.

	The following purchases can be “zero rated” for VAT purposes if certain conditions are met: · Advertising.   Virtually all advertising and advertising services, placed on third party media.  Your own website and direct mail shots are excluded. · Goods connected with appeals/collections.   Secure collecting boxes or buckets, nominal acknowledgements (eg. lapel stickers), pre-printed appeal letters and envelopes, response envelopes, offering envelopes and similar. · Printed matter.   Books, booklets, brochures, pamphlets, leaflets, newspapers, journals, periodicals and associated minor supplies. · Building Work.  As a general rule, new construction (including certain builders ‘fixtures’), construction of independent annexes to existing buildings or approved alterations to listed buildings, in each case used for charitable purposes, should qualify.   So does a ‘substantially reconstructed’ protected building. · Facilities for the disabled.   Including wheel chairs, construction of ramps, widening of doors and passageways, and services (not goods) provided to adapt a washroom or lavatory for handicapped persons.

A reduced (5%) rate of VAT is applicable to:
· Fuel supplies used by a charity other than for business (note ‘business’ is widely defined).  
· Supply and installation of certain energy saving materials used for charitable purposes.

Exemption
A vendor or landlord cannot opt to add VAT at 17½% to a building sold to, or rented to a purchaser/tenant who uses the building for a relevant charitable purpose (not as an office).   If they do, resist!   The transaction is exempt.

Conclusions
Churches and charities should look for opportunities to legitimately reduce or eliminate VAT costs.   There are detailed rules and conditions for the reliefs described, so competent advice should be taken, especially where significant expenditure is involved.

By Kevin Russell of Stewardship Services, Technical and Professional Services Director at Stewardship Services